Joe Carey (Clare, Fine Gael)
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551. To ask the Minister for Agriculture, Food and the Marine the plans he has submitted to the Department of Finance to deal with the issue of income volatility for farmers as it pertains to income tax owed, especially dairy farmers in the context of the published national farm survey average dairy farm income figure of €68,887 for 2014 and an estimated Teagasc figure of €35,000 to €40,000 for 2015; and if he will make a statement on the matter. [32147/15]

Simon Coveney (Cork South Central, Fine Gael)
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Taxation policy is primarily the responsibility of the Minister for Finance. However I have on-going contact with Minister Noonan to ensure that taxation policy reflects the Government’s commitment to agriculture, as evidenced by our co-operation on the ‘Agri-taxation Review’, which was published as part of Budget 2015. The Agri-taxation Review is a comprehensive taxation strategy for the sector and the Government’s commitment to agriculture was evidenced by the immediate implementation of the majority of its recommendations, including two recommendations aimed at addressing income volatility:

- retaining and enhancing Income Averaging by increasing the averaging period from 3 to 5 years; thus giving more scope for income smoothing within a commodity price cycle;

- allowing averaging to be availed of where a farmer and/or their spouse receive income from an on-farm diversification trade or profession.

Income averaging allows a smoothing of the tax liability in any given year to balance out the income effects of fluctuations in commodity prices that occur from year to year.

However, taxation measures alone will not deal with the issue of income volatility.

I believe that moving up the value chain where possible, in terms of the type of products sold and how they are produced, is a key insulation against volatility. More efficient and sustainable production systems are also important to improving profitability. The new Food Wise strategy, launched in July, contains detailed recommendations aimed at improving value added and productivity at all stages of the food supply chain.

The measures in the 2014-2020 Rural Development Programme will provide vital support through farm investment, agri-environment and knowledge transfer schemes.

Direct payments to dairy farmers, estimated by Teagasc at about €20,000 per farm, provide a source of income which is particularly important in challenging years.

The package introduced by the EU Commission last week to address difficulties in the dairy and pigmeat sectors reflects the majority of the demands I presented to them, particularly:

- The increase of more than 100% in the rate of private storage aid for skimmed milk powder.

- The award of almost €14 million in direct aid to Ireland.

- The concession made by the Commission to allow advance payments of 70% under the direct payments scheme and 85% for rural development schemes before completion of controls, which will be of major benefit in easing the cash flow of farmers.

I have regular meetings with the CEOs of the main banks, and I know that all are aware of the difficulties in dairy prices this year, and are planning accordingly in terms of managing dairy loans. The dairy sector is resilient, and banks will have to step up to the plate to assist farmers over what will be a temporary trough in prices.

A key issue that warrants examination, particularly between producers and processors, is whether there is even further scope for longer term fixed price supply contracts for a proportion of farmers’ production and whether such contracts can be backed up by longer term supply arrangements with the buyers of Irish raw materials and ingredients.

Finally and importantly, in terms of super-levy impacts I recognised the difficulty that this caused for farmers here and took the decision to make the 3-year interest free instalment arrangement available to all those affected. This option has been availed of by approximately 3,700 producers and will be of assistance to farmers facing cash flow difficulties arising from super levy in the final year of the milk quota regime.